China’s political predicament

China was the first country in the world to create a modern state -- almost 2300 years ago and some 1700-1800 years before Europe -- as political scientist Francis Fukuyama has argued. But China has never had the rule of law, by which the country’s highest political authority should also obey the law. Even today, the Chinese Communist Party (CCP) is a law unto itself, and China’s judiciary is highly politicized and corrupt.

And China’s rulers have never been subject to “downward accountability” to the country’s citizens through democratic elections. This situation was facilitated by the feudal nature of Chinese society through much of its history when the vast majority of Chinese citizens were poor farmers living in rural areas. But dramatic changes in the past few decades threaten to upset the stability of China’s authoritarian regime.

Deng’s reforms

The reforms of Deng Xiaoping from 1978 gradually opened the country to international and domestic market forces. They also upended Chinese society and politics. Suddenly Chinese citizens were better educated, more prosperous, and increasingly urbanized. They were able to experience the fresh air of economic freedom and opportunity.

History shows that urban, educated middle classes, rather than disaffected peasants, can be a major force for political change, as political scientist Samuel Huntington observed. So it was not surprising, in retrospect at least, that massive official corruption provoked the 1989 Tiananmen Square student protests. This desperate cry for democratic freedom was a near-death experience for the CCP.

Now more than 25 years after, the CCP still shudders on the anniversary of the “June Fourth Incident”. It clamps down on social and other media, and the movement of activists, and it exerts a maximum of repression of any possible commemoration or even discussion of the event. Despite China’s constant railing against Japan’s alleged attempts to whitewash its wartime history, Tiananmen Square is a completely taboo subject in China, as are Mao’s disastrous Cultural Revolution and Great Leap Forward.

Moving on from Tiananmen Square

China’s rehabilitation following this horrendous massacre took a few years. Deng Xiaoping’s “southern tour” of 1992, when he relaunched China’s economic reforms, marked the next phase in China’s economic, social and political development.

The post-Tiananmen phase of China’s development proceeded on the basis of a “social contract”. The implicit deal was that the Chinese population would accept the authoritarian rule of the CCP because it was very successful in engineering economic growth, the key to poverty reduction and prosperity. And the CCP delivered on its part of the deal as China registered average economic growth rates of 10% or more for many years, and hundreds of millions were lifted out of poverty.

This became the basis of the CCP’s legitimacy, "performance legitimacy". And it also earned the admiration of many Western and other observers who were impressed with the Chinese government’s capacity to make big decisions, and implement large projects like the Three Gorges Dam in the face of large opposition and environmental destruction. Quashing human rights seemed to be a worthwhile price to pay for economic efficiency.

Following the Tiananmen Square incident, the CCP further bolstered its role as the legitimate representative of the Chinese civilisation and people with a highly nationalistic and above all anti-Japanese discourse. This was a big turnaround, as during the 1970s and 1980s, China and Japan actually had good relations, as historian Ezra Vogel has argued.

In 1972, Mao Zedong told Prime Minister Kakuei Tanaka his apologies for Japan’s wartime aggression were not necessary, and expressed gratitude for Japan’s help in defeating Chiang Kai-shek’s Kuomintang. And following Deng Xiaoping’s historic visit to Japan in 1978, relations between the two countries improved greatly. Japan played a key role in the take-off of the backward Chinese economy through financial assistance, corporate investments and technology transfer.

But things changed quickly after the 1989 Tiananmen Square incident, even though Japan was the first country to restore high level relations with China following the diplomatic rupture with advanced countries.

One lesson that the Chinese leadership drew from the Tiananmen Square incident was that the Communist Party needed to make greater efforts to promote nationalism to improve support for the Party. So under China’s next leader, Jiang Zemin, China embarked on a massive campaign of patriotic education. Students and citizens were taught how the Communist Party was leading China’s recovery from its “century of humiliation” (from the opium wars to the end of the civil war in 1949). And at the heart of this patriotic education was anti-Japanese propaganda, since Japan was the country that inflicted the most suffering on China.

The official anti-Japanese campaign has left deep scars, as academic Minxin Pei has argued: “Chinese state media and history textbooks have fed the younger generation such a diet of distorted, jingoistic facts, outright lies, and nationalistic myths that it is easy to provoke anti-Western or anti-Japanese sentiments”.

China’s relations with Japan stand in sharp contrast to the reconciliation that Japan has managed to achieve with other wartime enemies like the US, Australia, the Philippines, and Singapore. US President Obama and Japanese Prime Minister Abe recently said “the relationship between our two countries over the last 70 years stands as a model of the power of reconciliation”.

National victimhood has also become a key narrative, focussing on the "century of humiliation". But victimhood has morphed into resentment and the desire for revenge which is evident in much of its international behaviour from cyber-hacking to claiming sovereignty over the distant South China Sea. China is now not only in the midst of an economic recovery, but also the restoration of national pride, and the CCP is leading this battle.

It is also true that the post-Tiananmen period has been a great expansion in economic and personal freedoms. Many young Chinese have been allowed to study overseas, especially to the US. More recently, the numbers of Chinese travelling overseas as tourists have grown to the point whereby China has the world's highest number of international tourists, with Japan becoming a very popular destination. Chinese citizens also enjoyed increasing access to information and participation in social media thanks to the Internet.

But despite the expansion of personal freedoms, as Human Rights Watch has noted "China remains an authoritarian state, one that systematically curbs fundamental rights, including freedom of expression, association, assembly, and religion, when their exercise is perceived to threaten one-party rule".

Signs of fragility

When the US juggernaut economy was struck down by financial crisis in 2008, China was on top of its game. Three decades of uninterrupted economic growth, and poverty reduction. It thus reacted with triumphalism and rejoice at the apparent decline of America.

But behind that was a quiet reaction of panic. China’s economic miracle had been based on exports to the US and other advanced markets. And China’s exports took a bit hit. So the government responded with perhaps the world’s biggest ever fiscal stimulus package. A couple of years of debt-driven growth gave the impression of the superiority of authoritarian capitalism and Chinese invincibility.

This would however prove to be a mirage. Much money was wasted on excessive infrastructure, housing and industrial capacity. National debt, especially of state-owned enterprises and local governments exploded. And state-owned enterprises only grew further in strength and political influence, as they were very important instruments for administering the stimulus package.

By now, it was clear to all that China’s economy needed reform. A World Bank report of 2012, jointly authored by the Chinese government, argued that for China to advance from middle-income to high-income status would require comprehensive market-oriented reforms.

But China’s fragilities were deeper. Official and corporate corruption had become rampant. Inequality surged to almost world record levels, in part due to corruption. The local environment, notably air quality, became atrocious. Many rural citizens suffered from land grabs from rapacious local government officials.

Public support for the CCP was dwindling. People who have grown up during the period of rapid economic growth have much higher expectations than their ancestors. The regime of President Hu Jintao and Premier Wen Jiabao, which oversaw China’s most rapid period of economic growth, was widely considered to have left appalling legacy.

The growing frustrations of ordinary Chinese is reflected in social unrest, which has been increasing at an alarming rate, according to a 2012 Chatham House paper. While there were few incidents of public demonstrations, disruptive action or riots in the 1980s, some 8,700 ‘mass incidents’ were recorded in 1993 alone. By 2005, their number had grown tenfold to 87,000, and estimates for the number of public protests in 2010 range between 180,000 and 230,000. The social unrest arises from issues like as land disputes, environmental degradation, labour conflicts and ethnic strife.

President Xi Jinping and the reform imperative

Xi Jinping’s ascension to the presidency of China and head of the CCP in late 2012/early 2013 was a deeply troubled affair. It was marred by factional infighting and a murderous scandal involving his nemesis, Bo Xilai, who was prosecuted and now lives in jail. Xi thus began his presidency with a CCP more divided between factions and clans than since Tiananmen Square.

And with China’s economic model of investment- and export-driven growth now in desperate need of reinvention, the CCP’s Third Plenum of 2013 agreed on an ambitious reform agenda through which market forces would play a “decisive” role in the economy.

But in his first years at the helm of China, Xi Jinping has focussed almost entirely on fighting corruption, increasing political repression and controls, and sabre-rattling on the international stage. He believes that failure to address corruption would mean the death of the CCP.

There have been very few important economic reforms -- if anything there has been backtracking from giving freer rein to market forces -- and many are wondering if he will actually achieve anything much else. While reform is key to improving productivity, it can also expose the economy to greater volatility and thus social instability.

Xi's anti-corruption campaign has been vast, implicating thousands of both flies (low-level bureaucrats) and tigers. Former security czar and Bo Xilai supporter, Zhou Yongkang, and former close aide of former President Hu Jintao, Ling Jihua, are perhaps the biggest catches. While these cases provide good political drama, many say that low-level corruption, which most affects people’s daily lives, carries on unabated.

Although Xi's anti-corruption drive has merely scratched the surface, he has exposed how thoroughly corrupt the whole system (and the CCP) has become. It is a complex system of patronage which holds the CCP together. Corruption also takes many forms, as the flouting of regulations behind the Tianjin factory explosion testifies. One of the most troubling aspects is corruption in the military where large bribes are paid for promotion casting serious doubts on how powerful the People’s Liberation Army really is.

It is difficult to see how such deeply entrenched corruption can be solved by a campaign like that of President Xi. Experience shows that all countries are vulnerable to corruption, and the only effective way of controlling corruption is by allowing freedom of the press, civil society watchdogs, and independent anti-corruption commissions.

But there is none of that in Xi’s China. The CCP decides who is and is not corrupt. Media and civil society activists who speak up on corruption are arrested. And it is clear that Xi is using the anti-corruption campaign as a means of eliminating political enemies and rivals. But it also seems that the deeper that the anti-corruption campaign digs, the more enemies Xi has. Chinese social media is full of rumours of alleged assassination attempts against President Xi.

Chinese leaders, who are enamored by Singapore’s authoritarian success story, should learn some of the real lessons of its success. Lee Kuan Yew used democratic institutions and the rule of law to curb the predatory appetite of his country’s ruling elite. Singapore is now ranked the least corrupt country in Asia by Transparency International, at seventh place on its global Corruption Perceptions Index.

Some analysts argue that Xi’s anti-corruption campaign is a means of eliminating vested interests who might oppose his reform agenda. This seems unlikely given the selective way that the anti-corruption campaign has been conducted -- a large share of convicted officials are linked to Zhou Yongkang, and no “princelings” have been prosecuted. And the vast nature of China’s vested interests -- like managers of state-owned enterprises and banks who sit on the CCP’s Central Committee -- cannot be tackled by his anti-corruption campaign.

Talk of improving the rule of law at the 2014 CCP plenary session had nothing to do with making the CCP subject to China’s constitution and other laws. Rather its main effect may be as an instrument to control local officials and their interference in judicial cases. Ironically, discussion of the rule of law has also coincided with a wave of arrests of human rights and other lawyers.

But lawyers are not the only victims of Xi’s wrath. “Authorities have also unleashed an extraordinary assault on basic human rights and their defenders with a ferocity unseen in recent years”, according to Human Rights Watch, an activist group. Authorities have also “issued directives insisting on “correct’ ideology among party members, university lecturers, students, researchers, and journalists. These documents warn against the perils of ‘universal values’ and human rights, and assert the importance of a pro-government and pro-CCP stance.”

President Xi has also launched his own propaganda campaign in the form of the “Chinese Dream”, which Xi has described as the “great rejuvenation of the Chinese people … improvement of people’s livelihoods, prosperity, construction of a better society and a strengthened military”.

Despite the seeming great power of Xi, there are still many questions raised about the coherence of Chinese policy, and in particular who is really in charge of China. The fact that Xi needs the military to insure his power may give it some independent latitude in its actions in the South China Sea.

What future for China and the CCP?

Analysts have been predicting the possible demise of the CCP or the impending democratization of China for many years.

“The endgame of Chinese communist rule has now begun, I believe, and it has progressed further than many think”, argued David Shambaugh of George Washington University in early 2015. According to Shambaugh: China’s economic elites already have one foot out the door; the CCP’s deep anxiety and insecurity is reflected in the intensification of repression; many regime loyalists are just going through the motions; no campaign can eliminate China’s deeply-rooted corruption; and China’s economy is stuck in a series of systemic traps from which there is no easy exit.

Minxin Pei has argued that President Xi's war on corruption could hasten the CCP's fall. It campaign has exposed how thoroughly corrupt the whole system has become, and continuing the fight against corruption may tear the CCP apart.

In 2013, Minxin Pei also argued that China is already well into the “zone of democratic transition”, with its GDP per capita in purchasing power parity terms of over $13,000. China's GDP per capita income is above those of South Korea and Taiwan in the mid-1980s on the eve of their democratic transitions. Francis Fukuyama has also argued that China’s political system is unsustainable in light of China’s growing middle class society.

For its part, the CCP is openly worried that the stability of the Party will be undermined by Western ideas and “universal values” like constitutional democracy, human rights, media independence, and transparency, which it regards as being responsible for the “color revolutions” in Eastern Europe and the Middle East. So the Party has been clamping down on Western ideas in research centers, schools, universities and civil society, and also on the Internet.

The response of China’s military to a wave of political and social instability would be critical -- a military takeover could take China backwards in terms of economic and social freedoms, and economic development. China's left-wing, with its fond memories of Mao, has its supporters. But a military intervention would also likely be violent.

And yet, despite all these doomsdayers, there are also many who believe that the CCP will hang on to power for at least the foreseeable future. They argue that much of the middle class, which has benefited from China’s economic miracle, still support the CCP, and most certainly fear the consequences of instability. Further, over 85 million people are members of the CCP, who are important stakeholders in the existing system. The CCP “co-opts” into the Party members of social elites, like academics, professionals and entrepreneurs. This is a way to neutralize social groups who are normally forces for democratization.

And China’s internal security service and the People’s Liberation Army are arguably strong enough to keep things under control. A massive domestic security budget (more than the military budget) is employed to maintain social stability. And China reportedly has an “Internet police force” of some 2 million, who are constantly monitoring and censoring the Internet.

Most certainly, President Xi is firmly intent on holding onto power, and has no intention implementing any democratic reforms. Xi has analyzed the demise of the Soviet Union, and concluded that, in contrast to Gorbachev, the CCP must stand firm. Any political reform is about the CCP reforming the CCP, not reform of the political system.

If the CCP is able to maintain firm control under Xi’s watch, one likely scenario could be for a period of long, slow economic and political decay. Since economic crisis very often leads to political change, the CCP will do everything to avoid a crisis. But crisis also allows the economy to cleanse itself of excesses, and begin a new process of rejuvenation.

China’s political predicament

The CCP is operating in “survival mode”. But the more that it struggles to survive, the more that it shows its weaknesses, and indeed the weaker it is.

China wants to be a global power and a regional hegemon. And it wants to be respected as a great power by the US and the West. But so many of its actions inspire distrust by the global community and above its neighbors -- actions like its construction activities in the South China Sea, its cyber-hacking and its military parade on the occasion of the 70th anniversary of the “Victory of the Chinese People’s War of Resistance Against Japanese Aggression”. The observation of historian John Fairbanks that, throughout its history China had been a very proud nation and looked down upon other nations, may help us understand such behaviour.

China is also a paradoxically weak power. It builds high-speed trains. It has great plans for a new silk road. It has established the Asian Infrastructure Investment Bank. And yet it cannot solve problems like food safety, or pollution. Nor can it cannot afford to provide health and education services to migrant workers and their families in China’s large cities. In short, so many of the Chinese government’s grandiose projects seem to be for “showing off”.

Chinese leaders are keen to ignite the flame of innovation as the key to the next phase of China’s development. But as academic Kerry Brown has highlighted, “hierarchy, vested interests, and complacency get in the way of anyone who aspires to be the Steve Jobs of modern China”. While “there are brave characters who do get through – people like Jack Ma, the founder of Alibaba”, the CCP “privileges fear, punishes risk and failure, rewards conformity, and prioritises control over creativity”.

Much like their Japanese counterparts a few decades ago, Chinese economic policy makers had earned badges of infallibility. But the turmoil confronting China -- sudden exchange rate devaluation, Shanghai stock exchange meltdown, further weakening of the economy, factory explosions in Tianjin, massive capital flight -- all reflect governance weaknesses and blunders. The knee-jerk reaction of the Chinese government has been to look for scapegoats among journalists, market participants and regulators, with a number giving probably forced public confessions.

It is becoming abundantly clear that Chinese government leadership may not be as smart as often portrayed -- it is well known that there is as much cronyism as meritocracy. The extreme centralization of power by President Xi and his cronies may mean that he is not getting the best advice. As Chinese academic Yuqing Xing said, “when you look at how they handled the stock market, they don’t have the skills to deal with volatility”.

There is much that the CCP could do to adapt China’s governance to its increasingly modern and sophisticated society -- without even necessarily giving up its monopoly on power. Things like a more effective legal system and the rule of law, more freedom of expression and freedom of the press, and freedom of assembly and for civil society. The CCP’s authoritarian approach may have served it well in the early stages of development. But it is no longer fit for today’s China.

The government and the CCP know that there are problems, they are indeed very worried. But there is no sign of them loosening up. Their approach is to “batton down the hatches” against democracy, by increasing repression and controls. Actions like spying on overseas Chinese students smack of extreme paranoia reigning inside the CCP.

How long can all this last? What will be the ultimate consequences? Only time will tell.